Flush with cash, Colorado officials back tax hike

By Megan Schrader Updated: July 14, 2013 at 6:33 am • Published: July 13, 2013 | 8:15 pm 0

After some lean recession years, this year Colorado lawmakers were swimming in cash - a $1.1 billion pool of unspent dollars over what budget forecasters had predicted.

The problem was what to do with the cash but that's a good problem to have and the Democrats who control the statehouse proffered up some big line items for the 2013-14 fiscal year.

Lawmakers tucked away millions for rainy days, poured it into construction projects at colleges and stashed cash to address the rising costs of health care.

There were a few new projects, such a $19.8 million network of mental health crisis centers. And $30.5 million in pay raises were doled out for the first time in four years.

But it's what isn't in the budget that Republicans are talking about now that the dust has settled.

"We were willing to spend things on K-12 education, and there was no interest in the Democrats' side to do any of that. They wanted more taxes," said Sen. Kent Lambert, a Colorado Springs Republican who sits on the General Assembly's Joint Budget Committee.

Democrats, including Gov. John Hickenlooper, are asking voters to approve a big tax increase to fund education. The question is likely to appear on the November ballot and would increase income taxes as well as create a higher tax on income over $75,000. It could raise almost $1 billion in the first year.

"I think the latest economic forecast we had was that this year we could have over a billion dollars in excess of the planned budget, so if that's correct why do we have to go to voters and get another $1 billion in tax increases for K-12?" Lambert asked.

Democrats say that question is a bit of an oversimplification of a multifaceted and complex budget and that no one can count on a continuing increase in revenues.

"We think a lot of this money is from one-time sales of stock assets," said Henry Sobanet, director of the Governor's Office of State Planning and Budgeting. "We're trying to look to the future and be mindful of where that money came from. We're trying to set money aside to be prudent."

Sobanet said the Hickenlooper administration tried to direct that money to one-time expenses that wouldn't recur when the funding was no longer available.

A tax increase, on the other hand, would be a sustained revenue source - always there to fund education.

A majority of the increased revenue for 2013-14 went into savings accounts, specifically the state education fund and a general reserve fund.

Still, plenty of money did go into long-term programs that will drain state coffers for years to come.

"We have many other responsibilities in state government other than education," Sobanet said.

Medicare sucked the most out of the revenue with the state increasing what it pays to private and public health care providers and beefing up programs for children's health insurance and other needs to the tune of $130.2 million (that includes the $19.8 million for mental health crisis centers).

The Department of Human Services got a $78.9 million increase for improved services looking after the welfare of the state's most vulnerable citizens, including children and the elderly.

Sen. Pat Steadman, D-Denver, who chaired the JBC this year, said in years past the committee has had to cut the budgets to those two agencies.

"There was just some catching up we needed to do," Steadman said. "These were investments in programs so we don't live in a society where we have people going hungry and living on the streets. We all expect a little bit more and this year we really made a difference to live in a kinder, gentler more compassionate state."

And the state did increase the education budget.

The multibillion dollar state education budget increased by $153 million in the 2013-14 budget.

School districts now will get $5,954 for each student enrolled, a 1.9 percent increase.

Much of that increase is required under Amendment 23 - the voter-approved measure that requires per-pupil spending keep up with inflation every year.

It accounts for increased student enrollment.

Also it includes $20 million for special education programs.

The 2012-13 fiscal year had a huge surplus - $1.1 billion - all of which will go into the state Education Fund - an account which receives about 7.5 percent of the state's income tax revenue directly for the sole use of education. And the June revenue forecast estimated about $112.1 million in surplus will go to the fund at the end of the 2013-14 fiscal year.

"The Education Fund is healthier than it's been in years," Steadman said.

It is expected to get healthier. At the end of the 2013-14 fiscal year the Education Fund is expected to have $1.6 billion in reserves.

The growing balance in the fund can be used during an economic downturn to ensure that education is still able to grow its budget by the amount required in the constitution.

But the fund has been raided in the past for noneducation purposes - helping to offset deficits during the downturn, Lambert said.

"There's nothing that prohibits the Legislature from coming in and spending that money on something else," Lambert said. "This is sort of the political shell game when we're saying it's in the state education fund but really it's there for other purposes."

Steadman acknowledged that the money might be used in tough times to offset the general fund obligation to education, but it's better than not having a reserve.

"I hope that doesn't happen," he said.

In the Senate, no Republican supported the budget. In the House, 18 of the 28 Republicans voted against the bill.

Lambert said in years past the budgets have had broad approval from both sides.

"We made some compromises last year when we had a split Legislature and generally I think there was much better oversight," Lambert said. "It had a historically high level of support . this year they didn't care. They were going to push their political agenda and totally disregard what the people wanted."

As the cash piles up in the Education Fund cookie jar, a likely billion-dollar tax increase election approaches.

What do Colorado taxpayers want?

The truest measure of that will be found in election results less than four months from now.

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Contact Megan Schrader

719-286-0644

Twitter: @CapitolSchrader

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